Apple, Qualcomm won’t get to hog TSMC chip fab capacity

Both companies are looking to expand availability of key smartphone chips.

Taiwan Semiconductor Manufacturing Company (TSMC) won't let either Apple or Qualcomm lock up its semiconductor manufacturing capacity, despite both companies offering to write checks in excess of $1 billion. Though both Apple and Qualcomm are reportedly struggling to increase capacity to meet growing demand, TSMC doesn't want to bet the company on a single customer, according to a Bloomberg report.

Apple has been rumored to be working with TSMC for years to produce system-on-a-chip (SoC) processors for its iOS mobile devices. Apple has exclusively sourced processors from Samsung since the iPhone launched in 2007, but both companies have been embroiled in a high-profile patent dispute since early last year. Apple could be looking to either supplement Samsung's current manufacturing capacity, or to have an alternative supplier should Samsung decide to not renew its lucrative component contract with Apple. (A cynic might consider Apple's TSMC bid to be a "screw you" to Samsung, but most manufacturers prefer to have more than one supplier for all critical components.)

Qualcomm, which designs a range of baseband and SoC processors for smartphones, has itself faced supply shortages recently. The company blames those shortages for slow earnings growth, and Qualcomm CEO Paul Jacobs reportedly said he would "write big checks" in order to increase the supply of its critical smartphone-related chips.

TSMC is already Qualcomm's biggest supplier, according to Bloomberg, but the company also fabs chips for NVIDIA, Broadcom, and others. Agreeing to supply chips exclusively, even for large clients like Apple or Qualcomm, presents significant risk should that client's product change or be eliminated.

"You have to be careful," TSMC CFO Lora Ho told Bloomberg. "Once that product migrates, what are [we] going to do with that dedicated fab? We would like to keep the flexibility."

While sources for Bloomberg suggest that Apple and Qualcomm were attempting to make separate deals, it's also possible that both companies were involved in negotiations to produce certain Qualcomm baseband processors exclusively for Apple. Apple's current iPhone and iPad models both use Qualcomm baseband chips for cellular network access, and the company is expected to launch new iPhone and iPad models in the next couple months.